Malaysian gaming giant Genting Berhad is unlikely to consider selling any interest in Genting Singapore, operator of Resorts World Sentosa (RWS), due to its strategic importance and position as the group’s most profitable asset, according to Japanese investment bank Nomura.
Responding to a Bloomberg report that MGM Resorts International had held discussions with the Malaysian-based parent firm over a potential takeover or investment in Genting Singapore, Nomura analysts Tushar Mohata and Alpa Aggarwal said in a Monday note that such a transaction offered little incentive to Genting outside of a one-off cash windfall.
RWS, they explained, “generated the highest EBITDA among all of Genting’s portfolios of gaming assets globally, both before and during the COVID-19 period. This comparison includes Malaysia’s Resorts World Genting which is the next largest contributor.
“Also, being present in Singapore offers much needed geographic diversification, and regulatory predictability to the group … case in point: the Singapore government raised gaming taxes in a gradual manner, with sufficient advance notice, as opposed to the Malaysian government raising gaming taxes by 10pp at one go.
“Genting Singapore is also the strongest group entity from a balance sheet perspective, with net cash of SG$3.1 billion as of end-2021, and dividends received from Genting Singapore help Genting Bhd to service interest on some of the latter’s borrowings.
“Financially, while any sale of its GENS stake could potentially provide a one-time windfall to Genting Bhd and help reduce gearing, we believe there is no similar accretive reinvestment opportunities for such a large cash windfall.”
The analysts added that Genting Singapore’s EBITDA run-rate remains suppressed as it emerges from the COVID-19 pandemic, suggesting a sale at this time might not fully reflect the company’s potential earnings recovery.
In a Singapore Exchange announcement on Sunday, Genting Singapore confirmed that its Executive Chairman and controlling shareholder Lim Kok Thay recently received an “unsolicited approach” but explained the opportunity was not pursued.
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